For Squirtle, it mostly depends on how campy you're willing to be. This is definitely a matchup where your safest moves make a world of difference. F-Tilt should be your best friend, even more so than usual.
Feel free to run away with shellshifting and hydroplaned stuff. Simply moving a bit helps a whole lot, like walking or using shorthop N-Air in place, as his jab (the most threatening thing in his arsenal) outranges most of your stuff, but moving in and out of Luigi's range will help you a lot. He'll be rolling toward you, spotdodging in your face, throwing out jabs, and using Down-B to get in. Because none of these options are very good, using moves with very low cooldown, such as F-Tilt and quick aerials, will allow you to anticipate and punish his approach attempt without much trouble.
Do yourself a favor and don't be above him when he's on the ground. If you find yourself in such a situation, you need to move away unless it's too late. Try not to challenge him in the air unless you're in a great position to do so, like from under a platform. Trades are bad in this matchup, and the Luigi has to mess up for aerial fights not to trade. Edgeguarding isn't difficult; I usually find myself knocking Luigi after his Forward-B by using D-Air if he's low. If not, get the F-Air and repeat the process, since F-Air will put him back where he started, and you can repeat it. Water Gun completelystops his Forward-B, so it's good to keep it charged for that. Since most Luigi players will constantly be in an animation of some kind, footstooling is not going to happen, and STUPID LUIGI CYCLONE WILL SPIKE YOU AND MAKE NO SENSE, because it's STUPID, so make sure you outrange him and take full advantage of him when he's offstage.
If I can stress anything in this matchup, it's that you need to be really patient. Don't fish for grabs or worry about fatigue; you don't need to be very aggressive until he's off the stage.
Also, Lounis cheats--For some reason, approximately half of his Forward-B uses are misfires, but only when he's fighting me.
Good thing Water Gun negates them, though.